Distressed properties are expected to continue flooding the South African residential market for the next five years at least, says Peter Gilmour, chairman of RE/MAX of Southern Africa.
He explains that a lot of this is caused by interest rate hike on the horizon as well as the consumer’s debt-to-disposable-income ratios and the homeowner’s ability to meet their monthly bond repayments.
“Of the distressed properties listed in Gauteng, close on 40 percent have been successfully sold.”
He explains that these distressed properties spent an average of 48 days on the market and are priced between R250 000 and R2 million.
Cape Town’s hot property locations
Cape Town remains a sought-after property location for many home buyers and property investors looking for exclusive homes, say estate agents.
The city has consistently been ranked as having a slightly better economic growth rate than Gauteng at around 4.4 percent compared to Gauteng’s 4.3 percent, says Samuel Seeff, chairman of Seeff Properties.
He says Cape Town boasts the highest percentage of foreign buyers in the country as reported by FNB to be 5 percent of all buyers in the metro compared to the national average of 3 percent.
“All of this speaks to the buyer and investor confidence in the metro’s property market,” says Seeff.
He says the performance of the real estate market as a whole needs to be seen in the context of the country’s general economic climate and that of the global markets.
“History shows that the metro’s property market has the propensity for some of the highest capital growth in the country.”
Property buyers return to Johannesburg
The inner city of Johannesburg is attracting property investors with some snapping up bargain buildings for refurbishment and redevelopment at auctions.
According to Auction Alliance, property buyers and investors still regard property as an asset class as revealed in the commercial multiple auction held across the country in Johannesburg.
The South African commercial real estate market returned to double-digit annual performance in 2010 with a 13.3 percent total return from the 2009’s 11 year low of 8. 8 percent, according to the South African Property Owners Association and Investment Property Databank report Q2 2011.
The report shows that the headline total return is still dominated by the income component, which was 8.9 percent while capital growth was 4.1 percent.
Pretoria a buyer’s destination city
Gauteng's Pretoria is attracting a number of investors who are young with loads of cash as well as other property buyers to its affluent suburbs.
Waterkloof in the east of Pretoria is the young buyer’s destination location for those who are looking for an exclusive address.
According to RealNet area specialist, Heidi van Blommenstein, young professional property buyers with young families are targeting older homes in the lower price ranges of around R2 million.
She explains that these homes are typically between 50 and 60 years old with three bedrooms and old-fashioned kitchens and single bathrooms.
“Buyers view these homes as good investments and some are planning to upgrade their properties as and when funds allow,” she says.
Buy while interest rates are low
Now is as good a time as any to buy a home thanks to the slowdown in South Africa’s residential property price growth.
According to ooba, as the economy recovers, property prices remain reasonable and the effect of lower interest rates is felt.
Jenny Rushin, provincial sales manager at ooba says confidence will return to the bricks and mortar investments.
Would-be home buyers and property investors with cash have an opportunity to get into the property market, she says.
Although the property market got off to a slow start in 2011, estate agents are seeing an improvement in the market.
Take first offer, it may be the best!
If you receive a good offer for your home shortly after you have listed it for sale, you should consider it very seriously, even if it isn’t perfect.
He says that when sellers do get a quick response, their first reaction is generally not the happy one you might expect. “It is instead an almost instinctive rejection of the offer on the grounds that they must have set their asking price too low, or that they have plenty of time to get other offers close to their asking price.”
However, he says, the annals of real estate contain many instances of sellers who refused a good, if not perfect, first offer and who then had to wait a very long time before any more came in – very often at much lower prices than the first.
Checklist for buying sectional title
Those contemplating a purchase in a sectional title scheme often do not take sufficient trouble to investigate just how efficiently - or inefficiently - the scheme’s management is operating.
She says that people buying into a sectional title scheme are often too trusting on these matters. However, this is not the case with the banks, she says.
“Before they award a bond to a buyer in a sectional title scheme they will ask three main sets of questions - and it is exactly these same questions which buyers themselves should be investigating before taking a decision to purchase a property.”
If banks are not satisfied that certain requirements are not being met they will be reluctant to grant bonds on properties in certain schemes, she says, and this will directly influence an owner’s chances of selling their property in the future.
If you can afford it, buy that home!
Currently, low house prices and interest rates offer a once-in a lifetime opportunity for buyers to enter the residential property market.
This follows the banks Median House Price Index report that indicates that house prices grew by 1.6 percent year-on-year (y/y) in August from 2.4 percent y/y in July.
Research analyst for Standard Bank Home Loans, Sibusiso Gumbi says house prices are still way off their boom levels in most areas and interest rates at their lowest levels in more than 30 years.
A low interest rate environment allows individuals to qualify for larger loan amounts or pay lower instalments on a loan than would otherwise be afforded.